What your employees do with their smartphones on--or off--the clock is their own business, right? Not quite. In the bring-your-own-device (BYOD) era, the moment an employee uses a personal device to do any work--whether to read a text from the boss or check a competitor's website--the company can be liable for any laws broken using the device.

Coca-Cola learned that lesson the hard way: Last year the soda maker was hit with a $21 million court judgment after a Coca-Cola truck driver who was talking on her cell phone while driving struck a Texas woman.

Court cases in which employers are sued when employees misbehave using mobile devices are on the rise, says James Crumlin, Jr., a Nashville, Tennessee-based lawyer who practices corporate business litigation. Once a device is used to perform work, employers have the right to the information on it--and they can be held accountable for any laws broken through its use.

Here are some risks your company may be susceptible to as a result of your employees' bad mobile behavior:

Sexting and related forms of sexual harassment.

The risks here are real. Forty percent of adults up to the age of 34 admit to "sexting," or sending sexually explicit text messages. This might seem like a private activity, but it's really no different than a worker who speaks inappropriately to a colleague at the water cooler. From a company's perspective, it can actually be worse: With cellphone chatter, deciding a case isn't a matter of he-said, she-said. There's concrete evidence of misbehavior that, according to Crumlin, can be used against the company.

Distracted driving.

As the Coca-Cola case shows, "distracted driving" can become an expensive problem for companies. Most states now ban talking, texting, emailing, photographing, or doing much of anything with a handheld device while driving (some states even criminalize distracted driving). Your employees are probably doing it anyway: the Centers for Disease Control found in 2011 that nearly 70 percent of U.S. adult drivers up to the age of 64 reported talking on their cell phones while driving within a 30-day period. According to a World Health Organization report, approximately 50 million people are injured a year and another 1.3 million die as a result of distracted driving.

Social media content.

Sure, your company may block social media sites from the company network, but that won't stop employees from logging on with their personal devices. If your company has a BYOD policy, racist comments posted on Twitter or a photo of an employee trespassing (even if it's done as a prank), can be used as evidence in a lawsuit that also names the employer as a defendant. Remember, in order for a company to be potentially liable for misdeeds committed using a BYOD device, a plaintiff has only to show that the equipment itself was used at some point to perform work.

Lost devices with unsecured data.

Lost devices are a major risk--whether they are company-owned or not. A missing phone or tablet raises the possibility of an outsider accessing company trade secrets or sensitive information about customers and employees. Sometimes this information can be used against your company in court.

So what can you do to protect your company from these pitfalls? The solution centers around smart policy and compliance. While companies can't guarantee compliance with their rules, having a formal mobile policy in place will go a long way towards protecting them. An effective BYOD policy should include the following: clear statements that include consequences (i.e. if you are caught sending sexually explicit texts in the workplace you could face termination), training programs to address mobile liabilities, and heightened security measures like remote wipe and other capabilities.

Sure, implementing an ironclad mobile policy and ensuring that every employee's device, personal or not, has a "remote-wipe" capability can be time-consuming and costly. But these steps are a small price for a company to pay when a personal device used for work is also used to break the law.